Every Diwali, the news gets excited about "Muhurat trading". Stock exchanges open for a special session in the evening, prices tick up or down, and people ask me whether they should invest during that hour for good luck. It's a lovely tradition. For most mutual fund investors, though, it changes very little, and I think it helps to understand why.
What Muhurat trading is
On Diwali, the stock exchanges hold a short special trading session, usually about an hour, at a time considered auspicious. It marks the start of a new financial year in the traditional business calendar, called Samvat.
Many traders and families place a small token trade during that hour as a symbolic start to the year. It's a bit like opening a new account book, the bahi-khata, on Diwali.
The exact date and timing are announced by the exchanges each year, so check the official announcement closer to the festival.
Is the market special during that hour?
Not really, however exciting the news coverage makes it sound. It's a short session, trading volumes are usually light, and prices often move in a festive mood. Newspapers like to report how the market did during Muhurat trading, but one hour tells you nothing about the year ahead.
There's no pattern you can rely on. Some years the session ends up, some years down. It's a coin toss with better lighting. Treating it as a signal is superstition, not analysis.
People remember the years when Muhurat trading ended up and the year went well, and forget the years when it didn't. That's how a lot of market superstitions survive.
There's no harm in enjoying the tradition. The harm only starts when a single evening's mood is allowed to change a plan that was built for ten or twenty years, and I'd gently remind anyone who feels that pull that the market will be open again the next working day, and the one after that, long after the lamps are put away.
Why people trade during that hour
For many business families, Diwali is the real new year. Starting the year with a small purchase is a way of wishing for prosperity, the same way you might light a lamp or open new books.
Some people buy a share of a company they trust, some buy a little gold ETF, some buy nothing at all and just watch. It's more about the ritual than the result.
I like that. Money habits built on meaning often last longer than ones built on spreadsheets. The trick is keeping the meaning without letting it make the decisions.
Can mutual fund investors take part?
Muhurat trading is for shares and exchange-traded products. If you hold a demat account, you can buy an ETF during that hour, as our page on mutual funds versus ETFs explains.
For ordinary mutual funds, orders placed that day are processed according to normal cut-off and NAV rules, usually on the next working day. So there's no special "Muhurat NAV" for a regular mutual fund. If you place a mutual fund order during the festival, it simply gets the NAV of the applicable working day, like any other order. Our page on cut-off time explains how that works.
Should you start a SIP on Diwali?
If you've already decided to start a SIP, starting it around Diwali is a nice way to mark a new beginning. Many families like that, and there's nothing wrong with it.
What I'd avoid is deciding the amount or the fund because of the festival. Decide those calmly first, based on your goals. Then pick the day. The festival can choose the date. It shouldn't choose the amount. Our post on waiting for an auspicious day talks about exactly this balance.
Don't make a big bet for luck
This is the one thing I'd really caution against.
Some people put a large amount into shares or funds during Muhurat trading as a lucky start. If that amount is a meaningful share of your savings, the timing becomes a gamble on one evening. A small symbolic amount is fine. A big one-time bet isn't a plan.
I've seen families put a year's bonus into shares during that hour because an uncle said it was lucky. Sometimes it goes up. Sometimes it doesn't. Either way, it was a gamble dressed up as tradition, and the money was usually meant for something that needed it more than luck.
If you have a large sum to invest, spreading it over months is calmer, as our page on SIP versus STP explains.
If you already hold a demat account
If you trade shares already, placing a small token order during Muhurat trading is a harmless tradition. Keep it small, buy something you'd be happy to hold for years, and don't treat the session's result as a prediction.
If you don't have a demat account, there's no need to open one just for this. Ordinary mutual funds don't need it, as our page on whether you need a demat account explains.
A better Diwali habit
Here's what I suggest instead, and it fits the spirit of a new account book.
- Check that all your SIPs ran properly this year.
- Raise your SIP a little if your income went up.
- Update nominees and bank details.
- Write down what exists, so the family knows.
Our page on how to review your portfolio turns this into a simple yearly routine. It takes about an hour, and it's the most useful hour of the whole festival. Doing it around Diwali is a good way to remember.
A clean account book for the new year. That's the real Muhurat.
Gold, silver and the festival
Diwali also brings the question of gold and silver. Our post on Dhanteras: gold or SIP covers that. The same principle applies: enjoy the tradition, keep the investment side separate and sensible.
Watch out for festival offers
This is also the season of "festive" investment offers and new fund launches. Some are fine, many are just well-timed marketing. Our post on why we don't run festival offers explains how to think about them.
A word to first-time investors
Diwali is when many young people think about investing for the first time, often because a relative mentions Muhurat trading at a family gathering.
If that's you, great. But please don't begin with a stock tip during a festive hour. Begin with the basics: an emergency buffer, then a simple SIP you can keep paying every month. Our page on how to start investing in mutual funds walks you through it, and our page on investing from your first job is written for exactly this stage.
So, what should you do this Muhurat?
Enjoy it. Light the lamps, share the sweets, open the new book. If you like, make a small symbolic investment. Start or raise a SIP if you'd already planned to. And use the new year as a reminder to review and tidy your money.
Happy Diwali in advance, from all of us. If you'd like help with a Diwali review of your investments, I'm happy to sit with you. Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working from Indore since 2014. Get in touch.
